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Report: Some Military Consumers Not Seeing Earned Protections

From a Consumer Financial Protection Bureau News Release

WASHINGTON, March 6, 2014  Service members, veterans and their families who complained to the Consumer Financial Protection Bureau about financial products or services have recovered more than $1 million, but some military families are not receiving the added consumer protections they have earned, CFPB officials said today.

The relief, reported in the CFPB’s second snapshot of complaints from military consumers, covers more than 14,000 complaints from service members, veterans and their families received from July 21, 2011, through Feb. 1, 2014.

“Military families make enormous sacrifices for our nation and deserve to be protected,” said CFPB Director Richard Cordray. “I am pleased that the bureau has assisted thousands in cutting through red tape when dealing with their financial institutions. However, the complaints show that many service members, veterans and their families are not getting the protections accorded to them by federal laws, and that raises concern.”

The Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the CFPB, established the Office of Servicemember Affairs to address specific consumer protection concerns for the nation’s military community. A priority of the office is to monitor the consumer complaints the Bureau receives from active-duty service members, veterans, and their families, officials said.

By and large, officials noted, the complaints submitted by the military track with those of the population at large. In the last fiscal quarter, the CFPB handled, on average, more than 250 complaints per week from military families. Complaints have come from every state, and every rank and branch of the armed services.

Service members, veterans and their families who complained to the CFPB have received more than $1 million in relief since July 2011, officials said. Not all service members, veterans and their family members who submitted complaints received money; a number of them received non-monetary relief such as cleaning up their credit reports, stopping harassment from debt collectors, and correcting account information. Some had their complaints closed without relief.

But the bureau has seen monetary relief returned to military consumers across all products, officials added. Among companies that reported monetary relief, this includes:

-- A median amount of $470 for mortgages;

-- A median amount of $143 for credit cards; and

-- A median amount of $125 for bank account or service.

According to today’s snapshot report, the top three complaints by service members, veterans, and their families are mortgages, debt collection and credit cards, officials said.

While service members have all the protections that everyday consumers have, CFPB officials said, they also may have additional protections based on their military service. The CFPB is particularly concerned, they added, when service members are not seeing the unique protections accorded to them by federal laws. Specifically, the bureau is concerned with:

-- Debt collection: Since the bureau began taking debt collection complaints in July 2013, it has quickly become the top complaint category for service members. The CFPB is concerned about aggressive and deceptive tactics used by debt collectors against military members, officials said. These tactics often involve contacting a service member’s military chain of command, threatening punishment under the Uniform Code of Military Justice, threatening to have a service member reduced in rank, or threatening to have a service member’s security clearance revoked.

-- Student loans: The Servicemembers Civil Relief Act provides financial protections so that members of the armed forces can undertake military duties without adverse financial consequences. But military consumers have reported problems obtaining correct and consistent information on available SCRA protections for their student loans. Some report being incorrectly told by their loan servicer that protections apply only when they are deployed or that the loan must be in deferment. Consumers also report they are repeatedly and incorrectly asked to submit additional documentation, such as paperwork showing recertification of active duty status.

-- Payday loans: The Military Lending Act prohibits interest rates above 36 percent on some types of loans, including certain payday loans, auto title, and tax refund anticipation loans, to active-duty military and their spouses, and dependents. While the number of payday loan complaints received from service members has been relatively small, officials said, the CFPB is concerned that lenders are skirting the law by lending just outside its narrow parameters.

-- Mortgages: Military consumers have complained about mortgage servicers’ lack of knowledge about military-specific programs. They report that servicers are unaware of the guidance offered by the CFPB and the other prudential regulators that servicers must provide accurate and timely information about available assistance options when a military family gets permanent-change-of-station orders. Military consumers also have complained that servicers do not know about the short-sale guidelines aimed at assisting service members with PCS orders, or that a PCS move may be considered a qualifying hardship for various foreclosure-prevention programs.

The CFPB accepts complaints about credit cards, mortgages, bank accounts, payday loans, private student loans, consumer loans, credit reporting, debt collection and money transfers. The bureau requests that companies respond to complaints within 15 days and describe the steps they have taken or plan to take. The CFPB expects companies to close all but the most complicated complaints within 60 days, officials said, noting that complaints inform the bureau’s work and help to identify problems, which then feed into the bureau’s supervision and enforcement prioritization process.

Additionally, officials said, through “AskCFPB,” consumers can get clear, unbiased answers to their questions about payday loans at http://consumerfinance.gov/askcfpb or by calling 1-855-411-CFPB (2372).